Precious Metals

Written by Kathleen Gagne
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If you're going to invest in precious metals of any kind, it will help if you understand the underlying principles that drive the precious metals market. Why is a particular metal designated precious? What makes one metal more valuable than another? Why do the prices of precious metals fluctuate? Why does the value of precious metals continue to grow when other commodities prices are falling?

There are six prime attributes that gold, silver, platinum, and palladium have in common. All of the metals possess the qualities of beauty, rarity, portability, indestructability, utility, and inherent value. Because no other elements found in nature have the same intrinsic characteristics as gold, silver, platinum, and palladium, the four precious metals have been treasured since the dawn of history.

Investing in Precious Metals

You can invest in precious metals in a variety of forms such as gold bullion, rare coins, bars, and wafers. In the same way that specific attributes determine the value of other commodities, the fineness of precious metals affects its price. Fineness refers to the purity of the metal; the more pure metal in a bar, the more it is worth.

Bars and coins that are mass produced have a value that depends on what the market price is for each metal. On the other hand, rare coins are valued, in fact, for their rarity and also for their unique beauty. Their value can exceed the market value of the weight of the metal they contain. The rarer they are, the more valuable they are. Investing part of your portfolio in precious metals gives you purchasing strength because the value of precious metals, especially coins, generally does not fluctuate over time as much as other commodities. Precious metals can also serve as a hedge against inflation and the vagaries of politics and world events.


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